* Bond yields rise after employers add more jobs than expected * Fall in jobs participation rate a warning sign for economy * Fed still seen likely to announce new bond purchases next week By Karen Brettell NEW YORK, Dec 7 (Reuters) - U.S. Treasuries yields spiked on Friday after U.S. employers added more jobs than expected in November, though a drop in the labor market participation rate suggested the economy may continue to struggle. Nonfarm employment increased by 146,000 jobs last month, the Labor Department said on Friday, defying expectations of a sharp pull-back related to superstorm Sandy. The jobless rate fell to 7.7 percent last month, the lowest since December 2008. But the drop was because people gave up the search for work, which does not bode well for the economy. "It's stronger than expected on the surface but the unemployment rate fell for the wrong reasons," said Richard Gilhooly, interest rate strategist at TD Securities in New York. "The central case that the Fed is going to do QE is unchanged." Benchmark 10-year notes were last down 9/32 in price to yield 1.62 percent, up from 1.59 percent late on Thursday. Thirty-year bonds dropped 22/32 in price to yield 2.81 percent, up from 2.77 percent. Treasuries have gained in recent sessions on expectations that the Federal Reserve will announce that it will make new bond purchases when it meets next week. The Fed's current Operation Twist program, which involves buying longer-dated debt and funding the purchases with sales of short-dated notes, is due to expire at the end of the year. Traders then expect the Fed will turn to outright purchases of Treasuries as it runs out of short-dated debt to sell. Positioning ahead of the meeting and a reevaluation of the jobs data may bring buyers back to bonds at the higher yields, said Gilhooly. "I would think that you will see some buying coming in," he said.